Madrid-based teams operating with major financial advantage in transfer market

The tax laws in Spain have been in the news this summer for the so-called ‘Mbappe law’, but the reality is that Madrid-based teams are already operating with an advantage over many other regions in Spain. Across La Liga, the Community of Madrid has the lowest tax rate for high-earners.

State-wide, there is a flat tax-rate of 24.5% for all tax-payers in the top earnings bracket, but from there, the regional governments are free to decide how much more they pay. The Region of Madrid is the lowest out of the autonomous regions in Spain, with the top earners paying another 20.5%, totalling 45%. Meanwhile the likes of Valencia and Levante will pay the most of any region, with a 54% total tax rate.

As detailed by Relevo, players in Catalonia including Barcelona, Espanyol and Girona the rate is set at 50%, but those in Navarra (52%), La Rioja (51%) and the Canary Islands (50.5%) all pay more. For those in Galicia, Castilla y La Mancha, Andalusia and Murcia it is 47%. Castile y Leon is the next cheapest for players at 46% after Madrid, and the Basque Country is set at 49%.

Relevo go on to explain that the cost of squad in Valencia could cost as much as €20m per season compared to Andalusia if the players want to take home the same pay. For example, Villarreal were paying Alexander Sorloth €2.3m net in salary, which cost the club €5m, while if current club Atletico Madrid were to do the same, they would only pay €4.2m. His current salary is reported to be more than €3m net, a cost of €5.5m for Los Rojiblancos, and €6.6m for the Yellow Submarine were they to offer the same deal.

It is certainly a major boost for the Madrid teams in terms of attracting players. Currently a quarter of La Liga hails from that region, Real Madrid, Atletico Madrid, Getafe, Rayo Vallecano and Leganes, and some have pointed to the arrival of James Rodriguez at Rayo as an example of those benefits.